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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Day Traders Diary

10/26/12

Equities showed indecision in the early going after Apple (AAPL 604.00, -5.54) and Amazon (AMZN 238.24, +15.32) delivered disappointing results, while the first reading of the third quarter GDP was reported ahead of expectations. The S&P 500 followed the early choppiness with a late-morning slide into the red. After reaching session lows near 1,403, the index reversed and headed for fresh highs. However, the benchmark average could not hold its best level of the day and settled lower by 0.1%.

The advance GDP reading for the third quarter suggested the economy grew at a 2.0% rate in the second quarter when an increase of 1.9% had been expected among economists polled by Briefing.com. The slight beat comes as government spending contributed 0.7% to the number. The third quarter chain deflator reportedly increased by 2.8%, which was ahead of the 2.0% increase that had been broadly anticipated.

Technology stocks were in the spotlight as the market reacted to earnings from major sector components. Apple shed 0.9% after reporting mixed results. During the fourth quarter, the tech giant earned $8.67 which was $0.08 worse than the Capital IQ consensus estimate. Meanwhile, the company's revenue of $35.97 billion was in-line with expectations. The gross margin guidance, however, was a point of concern as the company expects the number to be near 36.0% in the first quarter, versus the 40.0% expected by analysts. Also note that the company lowered its earnings and revenue guidance below consensus.

Amazon gained 6.9% after reporting its earnings. The online retailer lost $0.23 per share. However, the number may not be comparable to the Capital IQ consensus estimate which forecast a loss of $0.10. The company's revenue of $13.81 billion was largely in-line with expectations, but management issued downside fourth quarter guidance.

Comcast (CMCSA 37.56, +1.20) advanced 3.3% after beating on earnings and revenues. The management commented on the reporting period by saying, "The third quarter continues our momentum. Cable's results show real strength in every part of the business, producing sustainable and profitable growth while we expand our product offerings, deliver more innovation and continue to transform the customer experience."

NetSuite (N 65.40, +8.49) surged 14.9% after the maker of ERP software reported earnings of $0.08 on $79.8 million in revenue. Both numbers came in ahead of the Capital IQ consensus estimates.

Coal stocks were broadly higher after Arch Coal (ACI 8.09, +0.78) and Cloud Peak Energy (CLD 21.20, +2.21) beat on earnings and revenues. During the third quarter, Arch Coal earned $0.20, which was $0.35 ahead of the Capital IQ consensus estimate. In addition, the company's revenue of $1.09 billion was also ahead of expectations. ACI settled higher by 10.7% in reaction to earnings.

Meanwhile, Cloud Peak Energy reported earnings of $0.80, which was $0.32 ahead of the Capital IQ consensus estimate. The company's revenue of $425.9 million was well ahead of the $393.57 million expected by the Capital IQ consensus. Cloud Peak stock surged 11.6%.

Arch Coal and Cloud Peak posted notable gains, and other coal stocks moved higher as well. Alpha Natural Resources (ANR 8.71, +0.28) and James River Coal (JRCC 5.09, +0.29) saw respective gains of 3.3% and 6.0%.

The Dow Jones Transportation Average outperformed the broader market, and added 0.3%. Expeditors International of Washington (EXPD 36.43, +0.65) was the top performer among transportation stocks. The delivery service provider advanced 1.8% after Goldman upgraded the stock to 'conviction buy' from 'sell' with a $42 price target.

Railroads also outperformed. Kansas City Southern (KSU 81.25, +1.22) rose by 1.5%, while Norfolk Southern (NSC 62.77, +0.20) and Union Pacific (UNP 123.61, +1.97) gained 0.3% and 1.6%, respectively.

Meanwhile, Overseas Shipholding Group (OSG 1.23, -0.09) was the biggest laggard. The oil tanker shipper dipped 6.8% to continue its recent weakness.

Homebuilder stocks saw general weakness and the SPDR S&P Homebuilders ETF (XHB 25.52, -0.10) settled lower by 0.4%. Among individual builders, Standard Pacific (SPF 6.90, -0.85) slid 11.0% after announcing disappointing quarterly results. During the third quarter, Standard Pacific earned $0.05, which was $0.03 worse than the Capital IQ consensus estimates. The company's revenue of $318.5 million also fell short of the $385.02 million expected by analysts. Peers DR Horton (DHI 20.76, -0.35), Lennar (LEN 37.02, -0.49), and Ryland Group (RYL 33.76, -0.30) all lost between 0.9% and 1.7% in sympathy.

The University of Michigan's final Consumer Sentiment Survey for October rose to 82.6 from the 83.1 that was posted in the preliminary Survey. Many had expected the reading to go unrevised.


All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.